Surveying the Landscape: An Unconventional World
If you look around, around the world, there seem to be unconventional gas opportunities virtually everywhere.
That was what Dr. Stanislaw Cios showed delegates at the Global Shale Gas Plays Forum in Krakow, Poland, giving a speech entitled New Lands, New Possibilities.
First Counselor, Head of Global Energy Challenges Unit in the Department of Economic Policy at Poland’s Ministry of Foreign Affairs, Dr. Cios promised to deliver an analysis of global developments in unconventionals, including the impact of shale gas on global energy sector, from a political point of view.
He began by showing the main unconventional gas countries and estimates of their shale gas deposits.
“Just estimates, don’t take them at face value,” he advised, saying that opinions differed on the potential of shale gas.
“IEA is the most optimistic, believing resources are the largest in the world; others are conservative in their approach. The case of the US clearly proves systematically the resources of shale gas in the US have been underestimated. With new discoveries and developments resources are thought to be much larger,” explained Cios, who showed attendees a world map.
He said of Central & Eastern Europe: “There’s really a lot of gas and the potential is tremendous as this is an area that consumes a lot of gas. This still has to be confirmed - the gas and unconventional. Still most of the countries do not have assessment, half of the world is still unknown and the potential could be twice as large. Russia is an unknown picture to us in this respect.”
Among his general observations he said that shale gas deposits were huge and larger than conventional gas prospects, which had implications for energy balance as shale gas was close to consumers.
“The most promising developments are in countries with a strong dependence on natural gas imports, like Poland,” Dr. Cios said, “where 70% of natural gas is imported. There is strong political support for shale gas, and in all the major countries like China, India, even North African countries you have political support for it.”
“You have to have easy access to the market, unbundled transport capacity and a high domestic gas price,” he said, mentioning Poland’s plans for liberalization of the energy market. According to Cios, currently the price of imported natural gas was three times the cost of the Henry Hub price.
He spoke of the United States’ “Global Shale Gas Initiative” which aimed to assist other countries to develop their shale gas resources.
“Roughly until the end of 2009 the main issue in US-Polish relations was construction of an anti missile shield in Poland, but shale gas has become the main driving force between them now. The strategic importance of this issue in their relations is very large, confirmed by US President Barack Obama’s visit in May,” he explained, adding that the US had also signed memoranda with China, India and Ukraine for helping them develop their shale and unconventional gas.
“There are over 20 countries and others like Romania may be coming,” he noted.
Dr. Cios listed the E&Ps that had rushed into the US, making strategic agreements with US companies to develop their know-how regarding unconventional gas. “The list is interesting. You see the developments, starting in 2008, which is fairly late.”
He showed that fewer international companies had gone to Canada - just a handful - for the tech transfer than to the US. According to Dr. Cios, China’s CNPC attempt had been a failure in Canada. And he noted that no move had yet been made on the part of Gazprom towards shale gas.
He concluded: “European companies led the rush, and Asian companies have followed in the last two years. Canada is dominated by Asian companies. Most of the deposits in Canada are on the west coast; therefore for Asian companies this offers the possibility to export gas later on to the Far East.”
“The US shale gas rush was to learn the technology and apply it to other parts of the world,” he explained, “while in Canada it may be to export gas to other parts of the world.”
Looked at Chinese rules for shale concessions, like the fact that only Chinese companies can obtain licenses, which means internationals have JVs.
Dr. Cios said that, other than the fact that only Chinese companies could obtain licenses for drilling unconventionals, the information coming from China was incomplete. “We know that they’ve been researching for quite a few years, but not enough information is being provided on China for various reasons. In 2010 the government planned to adopt a plan to produce 500 MCM by 2015 and 20 BCM by 2020. It’s obvious they are very keen on it,” he said.
Then, Dr. Cios switched to a potential shale gas country a bit closer to home: Ukraine.
“Most analysts agree there’s a lot there, very large resources. What’s good is there’s strong government support in this respect, but it may not be enough. It’s important right now at the opening of Nord Stream, because statements by Russia could serve as a stimulus for the development in shale gas in Ukraine. Up to now there has not been much, and one reason is the business community is waiting for results in Poland.”
He said that should shale gas be effectively developed in Poland’s Lublin basin, then one would expect it to be found in the adjacent area of Ukraine. “If the results are positive, it won’t take much time for bus community to show up. The government says it is interested in granting exploratory concessions.”
But it is not likely to be an easy road in Ukraine.
Dr. Cios explained: “The business community will face tremendous challenges, like the very complex political situation, especially regarding Russia. Another challenge is the country’s low transparency, complicated administration and low competitiveness on the market.”
Still, Ukraine enjoyed the lowest shale gas regulatory risk according to a graph from the Rapidian Group. Hungary was next to it, he showed.
Next up was coal bed methane developments in Australia. “The large amount has brought the price of natural gas down, and this has inhibited the amount of shale gas research. In July of this year Beach Energy Ltd. announced its first successful shale gas well. US companies are just now entering the market,” reported Cios.
He noted that Argentina’s natural gas consumption was over 50BCM. “The problem is most of the gas is consumed over winter time. The development of LNG import was fairly high, so the government decided to support the development of shale. It’s very promising and Argentina could be one of the frontrunners in the world.”
Among his general conclusions, Dr. Cios said that neither technology nor geology were barrier to the development of shale gas; that the shale gas boom was everywhere in major countries; and that the most advanced research had taken place in Poland, Germany, China, and Australia, among others.
“On a global scale production will start around 2015-20,” he explained. “A true revolution will start at the end of this decade, when you have production in a few countries. It will have tremendous implications on the future development of shale gas.”
He said that major importers of gas were not among the leading companies in shale gas. “They have these long term contracts and they are bound by them. This explains the ongoing debate in Europe on the role of shale gas. It’s viewed as bad for the environment because it’s competition.”
Key issues in the future, he said, were financial, political and regulatory, environment and social support and understanding the real nature of shale gas production.
Cios added: “There is no opposition to shale gas in countries where there’s a long-standing history of hydrocarbons production.”
In response to a query as to whether Poland was improving understanding of shale gas development, he replied: “The EU will study the position of shale gas in Europe. Analysis is being done at the Commission level and in counties like Poland. We have to reflect the thinking of all of Europe. At the political level there is not intergovernmental discussion. At the moment it’s all at the expert level, because they’d like to know more about these issues. So Poland’s role is limited at this moment.”
In concluding, he said that despite Poland’s present position in the EU presidency, the country could only promote shale gas within its own boundaries.
By Drew Leifheit